CYPRUS: It is time to act, says Transport Minister

The Ministry of Communications and Works is changing its name and with it the whole philosophy of a government office that had basically stayed the same ever since the Republic was founded.
The addition of the word ‘Transport’ is not just a simple change to the signage, but one that better reflects how the Ministry has evolved and represents the greater responsibility of the state as a regulator and owner of assets and less that of a service provider.
Transport, Communications and Works Minister Marios Demetriades told the Financial Mirror in an interview that his office now has a say in a very big part of the real economy, as it includes aviation, shipping, public transport, telecoms, the post and public works.
With these sectors evolving themselves, the Ministry could not stay out of this cycle and internal restructuring is taking place there as well, in line with the general reform of the greater public sector.
“It is time to act!” he said on several occasions, calling for all stakeholders to take advantage of the opportunities that arise to make Cyprus more competitive.
With the tourist season just started, Demetriades believes that air connectivity in Cyprus is now better, with more capacity available and airlines entering the market, refuting suggestions that the island would be isolated after the demise of national carrier Cyprus Airways.
On the other hand, the Ministry has commissioned a study that will overhaul the maritime industry, because he is confident that with the right incentives and Cyprus shipping finding its own niche, the sector will flourish again and contribute significantly to the recovery of the economy.
And reforms are not limited to just shipping and aviation, as the postal service will gain autonomy and the public transport sector will see novelties that were long overdue, helping to improve transport times, and making travel more efficient.

AVIATION: Connectivity remains at very high levels

“Connectivity in Cyprus has been and remains at very high levels. This year, for example, 1.1 mln seats have gone and 1.2 mln have been added. So, overall, there are many more seats added than what has left. New destinations have also been added, for example to Germany and Italy, and the frequency of some other routes has increased, for example to Israel, and I believe this will increase even further.
“From the routes that used to take place, all destinations have been covered. Connectivity remains at very high levels, and our aim is to increase that as much as possible. As a Ministry, in reality we do three things – the first is to implement as fast as possible the ‘open skies policy’. We offer the various rights we have with third countries, as well as some traffic rights after the suspension of Cyprus Airways, and routes that had not been operated for many years, especially to the Middle East. We traffic will also increase. The second thing we do is to try to keep the cost at low levels, as regards fees at the airports. We have introduced a new incentive scheme which is much better than the previous one because it not only covers new routes, but it also rewards companies that increase the number of passengers on existing routes. We have started now discussion with the airports operator Hermes to find a way to decrease the cost of the passenger taxes. These discussion will take a number of months and maybe necessitate some changes for the concession. The third thing we are doing is as the Civil Aviation Authority we encourage the maximum number of companies and accommodate as many companies as possible to come and base their operations in Cyprus. For all these there we are in close cooperation with Hermes. I had a meeting with the board of directors and shareholders of Hermes a couple of months ago and we agreed that we will form a steering committee to find ways to increase connectivity in Cyprus.
“About tourism, it’s a catch 22, chicken-and-egg. It is not only necessary to put on new destinations and new routes. What we need to do is to support those routes and this is where the role of the Ministry of Commerce and Tourism and the CTO come in. We need to support more actively the new routes that we introduce. And this is something that we plan to do, as a government, and we need to make changes in the ways we promote tourism as well.”
Although the number of flights from Heathrow is increasing, prices are still not coming down. Will they ever, we asked the Minister.
“Obviously the more competition we have, the lower prices we shall have. This is the basic rule of the market. Now, what we are doing in agreement with Hermes, is monitoring the prices, just to see the impact of prices and how prices compare with last year. Regarding whether prices will fall or whether they should fall, basically we should give it some time. With new companies introducing additional flights I believe prices will come down at the end of the day. Because Aegean is introducing flights directly to Heathrow, British Airways is putting additional flights, we have a number of companies with flights to Gatwick or relative airports, so the prices should come down.
“I think the government acted very fast. In basically getting additional companies to cover the gaps (after the Cyprus Airways closure). We acted very fast in introducing the new incentives scheme, and with the new season that started at the end of March, all these changes are being implemented. So, we should see lower prices within the next months. But let’s wait and see.”

MARITIME – A new strategy in 3 months’ time

“The first thing I want to say is, regarding the new way of thinking of our shipping industry, it is time to act!
“As soon as I took over the Ministry, it was very easy to realise that the shipping sector had been stagnant, and not only because of internal reasons. If somebody is realistic and knows shipping how it works, realises that this is like a fallacy. The shipping sector in Cyprus has been stagnant for a number of reasons, because of the (Turkish) embargo, our competitors, especially in the registration of ships are growing at much faster paces than us. Now, does that mean that we shouldn’t do anything about it? Of course not. I’ve said this before, ‘now is the time to act!’
“Before you act, you have to do some planning, and we have to have the right way of thinking, a strategy. What I have been doing for the last 12 months, apart from taking a much more active role in the sector of shipping, I have spent a lot of time to visit companies at least once every three months. I’ve been on a number of trips abroad, either to London or Athens and a number of other countries to promote the Cypriot candidacy for the IMO of our Acting Director of the Department (of Merchant Shipping).
“What is the solution for taking the sector forward? I am presenting to the Council of Ministers the new plan, at least the principles that we should base our solution on. So, we are introducing a number of short-term measures and some medium-term measures. The solution for the restructuring of the Department is to give it the the necessary flexibility to do it’s work well. Because the DMS has been operating very efficiently for the last years but it hasn’t changed, it has not evolved. And of course this goes for whole government. We’ve had our government since 1960 and we haven’t introduced any major changes. Now, we have the opportunity to introduce major changes. We are changing the name of the Ministry to reflect the sectors that it represents. And it will put more emphasis on transport, because most of the things the Ministry does have to do with transport.
“I am convinced that the way forward for the Department (of Merchant Shipping) is to evolve, to become more independent, more flexible. And on the other hand I do believe that we need to do some internal restructuring and place more emphasis on the business development part. So, at the moment we are doing three things – regulatory, operational-technical, and business development – and we need to put more emphasis on the latter. But in order to achieve that to do it more efficiently and more effectively, we need it to operate not as a department of a ministry, but as an administration or as an agency, and this is what they do abroad.
“Regarding the Deputy Minister (for Shipping), have in mind that the only country that has this concept is Greece. In all the other countries it is under the Ministry of Transport, but what they do have is more flexibility, either as an agency or an administration. We need to give the necessary flexibility to the department to have a different mentality, to be more focused on the development, to be more flexible in serving the needs of the ship owners and the shipping sector, which they are doing very successfully, just as in countries like Malta, the U.K. and Ireland. In Greece, they have the Deputy Minister, but that office is also responsible for the ports and the coastline, so we are talking about an entirely different thing.
What I have included in the guidelines of the people doing the restructuring study is for the Department to be more independent, to be more flexible. I have already discussed this with the industry as well, and I will have further meetings with them. So, we are already acting on it.
“Regarding the short term, we are also introducing a number of measures, including a more professional way to promote shipping, using for example a specialist company, strengthening regional offices. We don’t need any more inspectors, what we need is additional people for business development. Introducing a package for companies that would like to settle in Cyprus, within the shipping sector, bringing in the private sector in promoting our flag, and also some operating improvements that will give more service our clients, the ship owners.
“One of the first things I did, was to bring the private and public sector together. And we came up with this EY study, whom we brought in through a tender. This is a study financed by the government, by CIPA, and I would like to thank its chairman, Christodoulos Angastiniotis personally. Some of these ideas are included in my proposals to the Council of Ministers. I have tasked a steering committee to come up within three months with a package that we could offer to companies willing to settle in Cyprus within the maritime sector. I do believe that we need to attract as many companies as possible to the island, because in this way of course we are promoting employment, and having a real impact on the economy.
“Of course in Malta they have a much bigger number of ships registered under their flag, and Greece of course, but they don’t have the big cluster (in Malta), whereas we do, and we need to enlarge that cluster as much as possible. In Greece they have about 200,000 people employed in their maritime cluster, whereas we have 4-4,500. There is potential for growth in our cluster, definitely.
“I have asked for some additional information to be included in the study and asked EY to not only do a comparison of the shipping sector with other centres, but also to come up with what specific incentives provided to companies within the maritime sector, and give this to the steering committee.
“The shipping sector is vital to the economy. It had a large growth in the first years and it has been stable in the last years. We need to know the real reasons and not to come up with things that we don’t really understand. We have to be honest with ourselves. There’s no magic solution for shipping. It will be a slow and painful process, but we can definitely do more things to promote shipping. And we definitely want shipping to be a bigger part of our GDP. And we can do that. I’m very optimistic, otherwise, I would not spend so much time on shipping.
“Our tax system is a very attractive one, it is approved by the European Union, and we will not see any changes. And this is what companies need, they need stability. The taxation is very good, but they need other incentives. I don’t want to predetermine the package, but I’m talking about getting easily work permits, for example the one-stop-shop should be a major part of this package.
“For the package for companies, I have called a meeting in April with the private sector, I will give the EY report, and I will tell them come up with a specific package within three months, I want to have it before the end of the summer so that we can implement it.
“For example, AC Nielsen had two major centres in Europe – one in Geneva and one in Oxford. One of the reason they went to Geneva was that they were offering lower taxation for the managers of the company. It was part of the package. It was not specific to the company. For example, I would like to see more ship owners and managers based in Cyprus.”

LIMASSOL PORT: On track with privatisation of services

“We are proceeding with the privatisation of services at Limassol port and we are on track. We have Rothschild as financial consultants and concluded with the legal consultants. By the end of April we will go for tenders, by the end of the year to definitely find investors, maybe this will take up to the end of March (2016) to sign all the contracts and complete all the paperwork. But we should more or less finish by the end of the year or beginning of the next.
“There is interest for the port, let’s wait and see how it will materialise. I am optimistic.
“In the case of Larnaca, if everything goes well, in the summer they will start working in the port. There was a problem with the funding, now I think Zenon joint venture is working on this. As regards the claim that the operator was already cashing in on port fees and revenues, we involved the auditor general to make sure the contract would satisfy the original terms, and there would not be any deviation. It is our job to make sure the interest of the Cyprus Republic are protected.
“But what I will say to the unions, because they have been on strike and nobody knows why, that everyday we have strike at the port we lose 1 mln euros in income for the economy, so they should be very careful when they stage their strikes. I had several meetings with them, I assured them that their basic rights would be protected. The right of strike should be utilised, but in the ports and shipping sector, they should be three and four time careful before going on strike.

NICOSIA BUSES: GPS tracking and ticket machines

The public bus services are now efficient, attitudes have changed, but unfortunately there are not many passengers. Why is that?
“The buses was the first area I touched when I took over at the Ministry. We have a 3-year plan and it was a bit of a mess. There were a lot of disputes and we created a specialised team to deal with the buses and we resolved a lot of the conflicts.
“The other thing we did , we passed the proposal for the introduction of the GPS system, and the system for automatic cancelling of tickets, or smart ticketing. That tender has already finished and we will start implementing the new system in 2015. We will know where every bus is and at every stop passengers will know when the next bus arrives. It will be done gradually. Smart ticketing will also allow us to do many things that now we cannot do. We will be able to improve the service to the customers and also improve the route. As regards the absence of ‘cyclical’ routes, it is true that buses only serve direct routes and not across town. We have just finished a major exercise of optimising the bus network.
“We have also taken the decision to bring in new buses, so we have started the process of purchasing or hiring, like a request for interest, to introduce a number of new small buses, and especially to replace the ones in Larnaca and Limassol where we have a lot of old buses.”

POST OFFICE – A new model